The hits just keep coming for the MBA Class of 2010.
First, the economy crashed just as students were stepping into their first B-school classes. Then the job market tanked. Jobs were scarce, salaries dipped, and students scrambled simply to find summer internships, let alone full-time positions. Now, a new study done as part of Bloomberg Businessweek's ranking of top full-time MBA programs suggests it's going to take graduates longer to see a return on their MBA investments than their peers did from earlier graduating classes.
Two years ago, Bloomberg Businessweek calculated that it would take members of the MBA Class of 2008 an average of 5.6 years to recoup their MBA investment. For the Class of 2010, the number jumped to 6.5 years. Why the difference? First, post-MBA salaries were lower in 2010 (down 6 percent from the 2008 average), while pre-MBA salaries were higher, meaning the pay differential between what a grad made before and after earning the degree was not as large. In addition, the overall cost of attending B-school increased, putting the Class of 2010 in a less-than-ideal climate to begin earning a return.
The MBA ROI figure was calculated using a few different data points. First, the total dollar amount the average student spends on a degree (tuition, fees, living expenses) was added to the total salary given up to attend B-school. The median pre-MBA salary was then subtracted from the median post-MBA salary, and the difference was divided into the total amount spent on the MBA. The resulting number represents the length of time, in years, it will take the average student to make a return on their investments.
Based on this calculation, it will take members of the MBA Class of 2010 anywhere from two and a quarter years to more than 14 years to recoup their money, depending on the school. The data aren't perfect: They do not take into account annual salary increases, bonuses, or stock-based compensation. But the numbers do give prospective students an idea of what kind of return grads from the top MBA programs can expect.
At the top of the list for best MBA ROI are five European B-schools, with Milan's SDA Bocconi (SDA Bocconi Full-Time MBA Profile) leading the way. At Bocconi, it takes students just over two years to move into the black, thanks mostly to the fact that it only takes one year to earn the degree, compared with the two-year commitment that most U.S. programs require. This means less time away from the workforce and a lower total cost.
The next three schools—HEC-Paris (HEC Full-Time MBA Profile), Manchester Business School (Manchester Full-Time MBA Profile), and Cranfield School of Management (Cranfield Full-Time MBA Profile)—also allow students to graduate in less than two years, and each requires fewer than three years to begin generating a return on the B-school investment.
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